Cytokinetics, Incorporated (CYTK) Earnings Call Transcript & Summary

All right. Thanks, everyone, for joining us this afternoon. I'm glad you guys can join us at the Goldman Sachs Global Healthcare Conference. We're really thrilled to be joined by Robert Blum, CEO of Cytokinetics. So thanks for joining us, Robert.

Thank you very much.

Right. So I'm going to take the prerogative to toss in a question that is very topical -- related to the drug aficamten for obstructive hypertrophic cardiomyopathy. A lot of amount of data this morning on the presented at the medical meeting. Can you walk through that data to think about that data in the context of aficamten in its body profile?

Sure. So the data that was announced via press release today allows us from the randomized portion of the Phase II study of REDWOOD [indiscernible] treatment and these data alongside of that have been presented last year provide further evidence that aficamten has achieved the effects, not just on reducing [indiscernible] and improving symptoms. And as we did, hopefully are very tolerated to support progression to Phase III, which is already ongoing. But these are data that speaks to the beginnings of reverse remodeling, as hopefully [indiscernible] that might continue with a longer duration study. These are seemingly [indiscernible] article with a lot of methodological changes in [ health ] structure that are indicative of [indiscernible] for patients who are on aficamten for not just weeks, but months and years. And this is, I think, somewhat revealing of what I would expect with the [indiscernible] improved outcomes in Phase III. So this has, from [indiscernible] data that is [indiscernible] of duration, but still highly suggestive and encouraging for what might come to follow.

Excellent. So we're going to shift gears and start by talking about omecamtiv mecarbil in heart failure with these ejection fraction. So you obviously filed with the FDA [indiscernible] have an outcome. So then what are the key topics of discussion during the outcome and how you prepare yourself to this upcoming advisory community meeting?

Sure. So just to back up a little bit [indiscernible] semantic for filing and then FDA accepted for filing, we were told that we should expect an outcome. We were part of that. And then more recently, based on further [indiscernible] options in our mid-cycle [indiscernible] they indicated that they're planning for one. So I can't know that might have changed their mind, but I have some expectations of guesses, maybe that this is -- a couple of few different topics I'll speculate here a little bit. One is that I think it's quite possible that FDA might want to conduct a panel to talk with academic advisers around potential scope of indication. We submitted [indiscernible] based on the results of GALACTIC, a Phase III study with over 8,000 patients, and for [indiscernible] effect was critical, relevant and statistically significant. But for where the effect size was concentrated and more pronounced in certain prespecified subgroups like patients with lower injection fraction. As we have done further prespecified and post-hoc analyses, we've seen effects are amplified 2x or more in patients who have worsening heart failure, whether that's defined by lower ejection fraction or higher BNP or recent hospitalization, whether that's defined by lower blood pressure, more compromised renal function. Anyway, you might look at worsening heart failure. There seems to be an amplified efficacy for omecamtiv when added to standard of care. So it's reasonable for FDA maybe to want to talk about scope of indication. Should this drug be approved for the broader population where it had a more modest effect or a narrow population where that effect is more pronounced? And there's some precedent for that with FDA convening an AdCom to talk about Novartis' Entresto, where it received an expanded approval based on a failed Phase III study, but for where there was action in a moderate ejection fraction group and the AdCom recommended that be expanded, and so FDA did that. So I could imagine FDA might want to talk about that topic. I could imagine FDA might want to talk about where there was potentially more risk in patients with ejection fraction north of 30% who also had AFib and who also received [ ejection ], those patients, when omecamtiv was added to standard of care, did worse. So it's conceivable FDA might want to have a conversation about should there be a warning or some sort of contraindication around that group? It's possible FDA may want to talk about the fact that we used a PK-guided dose titration assay in Phase III. It was deemed probably helpful, but not necessarily was it essential or required because only a couple of patients had excursions of north of 1,000 nanograms per ml, and therefore, just selecting doses, 25, 37.5 or 50 may be adequate to get patients to the right dose. And because we used it in Phase III, maybe they want to discuss with advisory committee members, the utility of a PK-guided dose titration assay, I don't know. I do know that we'll find out soon enough and we'll be very well prepared. We'll be alerted to the date of the meeting and the topics, hopefully, in the next month or two.

Okay. So it's really interesting this idea of kind of scope of patient population. So I guess, I mean, as you're kind of like scenario planning, the strategy planning, if there is a kind of like narrowing or kind of focusing of the label on this kind of much more reduced ejection traction population, worse heart failure status population, how does it affect how you think about commercialization, both in terms of like the sales force that's required and also around pricing in terms of like the more kind of orphan and indication, like orphan-like an indication this becomes, does that influence how you think about kind of the pricing of these types of drugs? Like how are you thinking about those 2 questions in this [ world ]?

Not so much. Firstly, it's still not anywhere close to orphan because you're talking about taking a population that might have been 3 million patients and narrowing it down to something between 1 million and 2 million patients. It does enable us to think about where we might concentrate our sales and marketing activities to a limited number of hospitals that tend to treat higher volume heart failure, a limited number of specialty cardiologists who tend to be high prescribers and treat those sicker heart failure patients, but we were already going to go there. For us to compete in this market, we already had determined regardless of whether we get the broader label or the narrower label, we should go where the patients are more identifiable and where we, as a smaller company, can stand alongside of larger companies in heart failure. Keep in mind that companies already marketing in heart failure are companies like Novartis, Merck, AstraZeneca, Boehringer Ingelheim, Eli Lilly together. There's a reason for us to be focused to where we would have a louder share of voice, and that's where other drugs may have waning effect and omecamtiv may have a more pronounced effect. So our sales and marketing and our pricing was already going to be oriented towards the sicker, worsening heart failure patients. And there's not a lot of degrees of freedom around pricing anyway because all these drugs tend to be priced in the same zip code beneath the specialty tier. So there's no step edits required and reimbursement challenges. So I don't think the broader or narrower label will affect that.

Okay. Interesting. So kind of beyond this notion of turning the sales force towards these identifiable patients that are kind of best meet the product profile, are there any of the aspects under blue sky when you get approval for omecamtiv? Should we think about the commercialization of this drug given the kind of like the area you're operating in is [ tensely ] dominated by large pharmaceutical companies?

Yes. So firstly, in heart failure, especially heart failure with reduced ejection fraction where there's high risk of rehospitalization, that's predominantly a Medicare population. So 2/3 of those patients are Medicare. So we need to be focused to Medicare contracting, and there's a cycle for that, and that takes 12 months or so. So coming out of the gate, the only captive launch will be metered and our spending will be titrated in alongside of market access. So we're looking at this launch perhaps differently than you might look at a lot of cardiovascular launches. And we're also recognizing that a lot of companies have underperformed in cardiology and expectations tend to be under or not yet met. So we're going to take this slow. The infrastructure we're building, we believe, is important in order to be able to enable us to compete as omecamtiv mecarbil becomes an on-ramp for aficamten. So there's a high degree of overlap in terms of workload, in terms of customer segmentation for where we need to be for omecamtiv and where we need to be for aficamten as we expect to launch there within approximately 2 years. So we look at this as a somewhat unusual opportunity in biopharma and certainly in cardiology to go to market with 2 potential medicines, a myosin activator and a myosin inhibitor within a 2- to 3-year time frame and as would be enabling of a franchise build. So think about the infrastructure we're building for omecamtiv as a leg up on what we need to be building for aficamten. The two of them together enabling a somewhat uncommon business opportunity that we think would have real legs and consider aficamten to be the booster on top of that. So that's how we think about the business prospects. In many ways, it leverages some of the same synergies and cost economies as we've already enjoyed in R&D, but now in commercial.

Okay. Excellent. So you don't think [indiscernible] shifting gears, I think, about aficamten or afi, we're going to call it for short. Can you -- besides the data you mentioned at the beginning of our conversation, could you walk through the existing clinical data for afi and obstructive HCM? And then kind of like how we should think about kind of the most recent Cohort 3 results from both REDWOOD-HCM and also the REDWOOD-HCM open label [ accenture ]?

So REDWOOD is the gift that keeps giving in many ways. We did a Cohort 1 with lower doses of aficamten in obstructive HCM. We did a Cohort 2 in higher doses. And between those 2 cohorts, we spin doses 5, 10, 15 and 20. And what we saw was rapid reductions in gradient, which is what one hopes to achieve when conducting a surgical procedure in these patients, obliterate the cavity, reduce pressures and improve symptoms. We saw reductions in symptoms. We saw improvements in NYHA class. These effects were achieved rapidly and were durable. The drug was well tolerated. We didn't see dose interruptions, dose holidays, dose terminations or ejection fractions falling below 50%, suggestive that this drug in this population is well tolerated in achieving the desired outcomes. Cohort 3, and by the way, Cohorts 1 and 2, we're hoping that will get published real soon. It was based on that, that we leaned forward into the design and conduct of the ongoing pivotal Phase III study. Cohort 3 read out subsequently that looked at a population of obstructive HCM patients receiving disopyramide. Disopyramide tends to be reserved for those more refractory oHCM patients. And what we were able to see is the drug aficamten can be used alongside of disopyramide, achieving increased benefit beyond disopyramide and is well tolerated, thereby affording us confidence to include patients on disopyramide in Phase III. That's not a large percentage of the total population, maybe 5% to 10%, but it's still meaningful, it suggests that aficamten can be combined effectively with a drug that's typically reserved for the sickest of sick patients. Cohort 4 of REDWOOD is now enrolling in an open-label fashion. This is non-obstructive HCM patients, and that would, if reads out positively, open the door for a second Phase III study in non-obstructive disease. So REDWOOD Cohorts 1 and 2 and 3 inform SEQUOIA, which is ongoing, we also recently reported on the open-label extension data for patients who rolled out of Cohort 1. And we're seeing -- when you remove some of the guardrails as is required in a randomized, placebo-controlled clinical trial and roll them into an open-label extension, we're still seeing effects that are early, pronounced, durable and well-tolerated, suggesting out to 6 months of therapy now in these patients that aficamten continues to demonstrate some next-in-class properties that we believe are supportive of the profile we're looking to take to market.

So I want to first start by kind of following this up by discussing SEQUOIA. So can you walk us through some of the key designs because you walked through kind of the patient population you're looking at just now. What is one of the key assets of the trial design for SEQUOIA and how to think about the SEQUOIA trial very practically?

So SEQUOIA will be the largest study of a new medicine in obstructive HCM. It's enrolling now U.S. and Europe. We just had the U.S. investigators meeting last week, we had the European investigators meeting. It's seemingly enrolling quite well. It started enrolling earlier this year, and we expect it to conclude enrollment within a year of starting and maybe even sooner. But our goal is to enroll 270 patients, randomized one-to-one and look at effects of aficamten as could translate from what we saw in Phase II, which is reductions in gradient to what we hope to see in Phase III, which is increases in exercise capacity. And the endpoint there is a very quantitative one. It's one that has high fidelity. Unlike some other exercise capacity endpoints, it's one that has a high test-retest reliability. And we think based on conversations we had with FDA that, that should be sufficient to warrant approval. We're also looking at improvements in symptoms and NYHA class, but those are secondary endpoints and decoupled from the primary. They should hopefully be reaffirming of what we're seeing in the primary. That one study which we hope will read out next year should hopefully be sufficient for approval. We've recently indicated we're going to do a second Phase III study. We haven't discussed it with FDA. They haven't asked for it. We haven't yet shared it with them. We're in the midst of finalizing the design. But that second study, we think, has the potential to evolve standard of care. BMS recently got approval for mavacamten, a drug that we helped to discover when we spun out a company called MyoKardia that BMS then acquired. It's a very good drug, and it's now approved for marketing. We believe it's opening the door as a new pharmacotherapy for these patients who have severe unmet need. But it's incumbent upon us with aficamten, if it is next-in-class, to expand the category as we think SEQUOIA can do, and this next trial should do even further. So probably in the next couple of months, we'll elaborate more on what we have in mind for that second Phase III study.

Okay, great. So coming back to REDWOOD and coming back specifically to Cohort 4, when can we expect data from Cohort 4 or REDWOOD-HCM and kind of further follow-up on the open label extension? And on the REDWOOD Cohort 4 study, can you walk through kind of how we should think about that and kind of like where it sits versus obviously [indiscernible] previous attempts going after non-obstructive patients. Like how do you design the trial to kind of kind of abate to the missteps that have happened previously in this space?

So firstly, with regard to the open-label extension, it's reasonable to expect other data cuts later this year, maybe at the HFSA meeting in September, maybe at the AHA meeting in November, we'll have more patients and longer duration and some other things that we think will be interesting coming out of the open-label extension. With regard to Cohort 4 of REDWOOD in non-obstructive HCM, we hope to complete enrollment of that by the end of this year. It's reasonable to assume we might see data from the Cohort 4 around Q1 next year, maybe at the American College of Cardiology. You asked another question.

Again, what how -- when you think of the design of REDWOOD Cohort 4, what have you learned? Because obviously, [ Navara ], the MAVERICK trial, which kind of had issues. So like how should we think about this strategy?

I might beg to differ a little bit. I look at the MAVERICK study and say it was -- it read out what was designed. It was never designed to be an outcome study. It wasn't large enough or long enough for stat sig on anything other than to be predictive of what we might see in a longer, larger study. So at that time, it was MyoKardia. MyoKardia conducted MAVERICK, which I thought was a good study, and it demonstrated effects on BNP, which I think are indicative and encouraging of what one might should expect to see in a Phase III study with an outcomes design. We'll be looking at BNP and other biomarkers, as well as other echocardiographic parameters in Cohort 4 of REDWOOD. And I think we'll have some things to say that might be beyond what was reported in MAVERICK. But I think the MAVERICK study was successful for what it was designed for. And I do believe that there'll be a mess, is building off of that. They intend to start a Phase III study in nHCM later this year with mavacamten, they've indicated they're on time line to do that, and we'll be not too far behind them, hopefully, with a Phase III study that starts next year based on Cohort 4.

Great. So now I'm going to ask you to engage a dangerous game of comparing drugs across clinical programs. But you live in the world, and so we have to ask these questions about how to think about the recent approval and label for Bristol's [indiscernible] in the commercial mavacamten? And how do you guys think about that in terms of competitive positioning versus aficamten in obstructive HCM?

So we can't compare because they weren't studied head-to-head. But for the fact that our scientist co-discovered mavacamten and we knew that compound for years before it ultimately got approved, and over the weekend, you might have seen FDA published the summary basis of approval for mavacamten, which is very revealing, a lot of things we knew about mavacamten have come to light. It's a very good drug. The data from EXPLORER are very positive, and FDA approved the drug, albeit with a REMS program that has some restrictions on it. But yet, this is the first pharmacotherapy for patients who desperately need one, and the effects are akin to surgical intervention. So I think this science has translated nicely. We designed aficamten to have properties that would render it next in class. It has a half-life and a PK/PD relationship that afforded an ease of dose titration that is enabling of us to study it in a way that can hopefully translate to broad efficacy and tolerability. So I'm not going to compare to mavacamten as much as tell you why we're pleased with where we sit with aficamten. The REDWOOD data were very encouraging, not only for the fact that we saw rapid and reversible effects that were consistent with a good tolerability profile, but that we didn't see any of the PK variability or any of the other issues that might render this requiring of intensive monitoring in a REMS program that might be challenging. Instead, we saw, in aficamten, a profile that we believe renders it possible to study in SEQUOIA as we are now doing that could hopefully allow us to have efficacy and safety in support of obstructive HCM in a meaningful population where we do believe that intensive echos and other things may not be required. But we still have to prove that. Phase III study is still underway, and we haven't demonstrated that as much as we have Phase II data that suggests that.

So you won't take the bait, but I'm going to dig in a little further on this one, that one of the things, recently in investor conversations after the label came out, the kind of key surprises how much drug-drug interaction or an issue. And to your point, it's noted that there's this PK variability. So do you believe that aficamten has kind of cleaner drug-drug interaction profile could lead to the kind of consequent reduced range of kind of PK levels could lead to a less laborious kind of monitoring regime? Is that how you're kind of thinking about these things?

So I'm going to avoid comparisons. But I will say that aficamten was selected so as to have a profile that shouldn't have DDIs. And therefore, we haven't seen any evidence of drug-drug interactions that would render its PK highly variable.

Okay. Great. So kind of at a more granular level, when we compare the obstructive versus non-obstructive population, can you give us a kind of sense of scale in terms of size of the patient population for obstructive versus non-obstructive? And then kind of like, I guess, at a deeper level, again you guys have discussed that you have heart failure with partial ejection fraction as kind of a next wave opportunity potentially. Can you give us a sense of scale for like obstructive versus non-obstructive verses HFpEF as patient populations?

So if you look at HCM as a pie, 2/3 of the patients would have obstructive disease, 1/3 non-obstructive disease. But the size of that pie is likely underrepresenting the eligible patient population because currently, today, patients are only being treated where they are symptomatic and having been screened, they are known to have a mutation in a diagnosis. The advent of a new pharmacotherapy from BMS, especially knowing how BMS is very good at these kinds of things in terms of education and awareness, is likely going to drive diagnosis rates higher. And you might expect to see twice as many patients eligible for treatment a few years from now than are currently receiving treatment because of better screening and better education and awareness. So I think the size of the population is probably going to grow by 100,000 or more. Right now, you might look at the size of the HCM population is 100,000 to 200,000 and it might double when you consider patients who are eligible with better education, awareness and screening. That is all dwarfed by the potential size of the HFpEF heart failure with preserved ejection fraction marketplace. If you think about there being roughly 6 million patients with heart failure today in the United States, half of those have heart failure with reduced ejection fraction, half of them have heart failure with preserved ejection fraction. That number is likely to grow to 8 million to 9 million in the United States by 2029. Not all of those might be benefiting from a myosin inhibitor. You might bifurcate that by those who have hyperactive ventricles and those who don't. So I don't know the exact percentage, but you might assume that it's 10% to 20% of the HFpEF population might benefit from a myosin inhibitor. That's still somewhat fluid because HFpEF is a bit of amorphous indication with better medicines. Like Entresto now approved and others, we're going to see that market evolve like we've seen the HFrEF market evolve. But I do think there's a potential role as measured by hundreds of thousands of patients, if not millions of patients for a myosin inhibitor.

So to that end, you did a really, I think, a nice job explaining the HFpEF opportunity kind of a targeted population. Is there a similar like targeted population, non-obstructive HCM? Or do you feel that myosin inhibitor should be able to kind of carry the day across non-obstructive disease?

I think myosin inhibitors can carry the day across non-obstructive, but think of non-obstructive as maybe a pilot for HFpEF, that portion will have hyperactive ventricles, because there's kind of a continuum of care here. Those non-obstructive HCM patients resemble those patients who have heart failure with preserved ejection fractions, but hyperactive ventricles. So they may be more similar to one another than non-obstructive is to obstructive.

Okay. So moving beyond cardiac myosin. So I'd be curious kind of to get your thoughts on the upcoming interim analysis from the Phase III COURAGE ALS trial of reldesemtiv in ALS in the second half. What are kind of the key things you're looking for from that interim analysis?

So this study called COURAGE-ALS is enrolling over 500 patients. When 185 patients get out to 12 weeks, we conduct an interim analysis that's designed around futility. And admittedly, it's not a very high bar. Patients have to be doing materially worse on reldesemtiv for us to stop the study, and we already saw in a couple of hundred patient Phase II study that patients getting reldesemtiv did better than standard of care. So it will be surprising if the study stops for futility, but it's still important to reaffirm safety. So we'll pass through, hopefully, that interim later this year. And then the study proceeds to a second interim next year that could be enabling of stopping for efficacy or futility, but also could be enabling of adding to the population studied if there is a signal of efficacy, but it might benefit from amplifying that signal. So there's some preordained algorithms for upping the size of the study, if that may be necessary. All of these things may prove to be irrelevant because I think the base case assumption should be that the study just completes its enrollment without any changes. And hopefully, that enrollment concludes early next year so that we might be seeing data by the end of next year. So you might anticipate if we go to market with omecamtiv this year, aficamten reads out its pivotal Phase III study next year, reldesemtiv reads out its pivotal Phase III study next year, ours is the complexion of a different kind of biopharma company with some late-stage programs that are turning a corner and representing some pretty significant catalysts.

So following from that, obviously, something on the top of mind of a lot of investors is the [ ALS ] FDA review process. So how does that influence how you think about the regulatory path for reldesemtiv? And then, I guess, more granularly, the clinical trial of reldesemtiv in a world where, say, the [ ALS ] drug gets approved, to what extent does that influence how you think about the powering of your study because -- and certainly, the kind of investor opinion is that if there's a new approved drug in ALS, that will shift standard of care in a pretty meaningful way and relatively quickly. So how are you thinking about kind of...

It's not like the way we thought about the approval of edaravone when it got approved and we were conducting a Phase II study, we've got to stratify for its use, but we don't foresee that it necessarily affects the powering of the study. The Phase II data for edaravone, the Phase III data for edaravone, the Phase II data for [ ALS ], they're all within the ranges that we already contemplated in powering the study. So it shouldn't alter the design and conduct other than the statistics.

Okay. So then stepping back and thinking about business development, obviously, you guys were very busy earlier this year in terms of finding partnerships for various programs and finding kind of means of providing cash, are you still on the look for additional kind of business development for your lead franchises? And how do we then with the kind of cadence of timing for additional information on that front?

So we were very busy last year, resulting in a number of deals announced at the end of last year and the beginning of this year. We're similarly very busy now. We're very actively engaging with potential partners, principally in Japan, where we're looking to partner omecamtiv and aficamten, similar to how we partnered both in China. And we're active in Europe where we're focused to partnering of omecamtiv mecarbil with goal of finding a partner with whom we could co-promote omecamtiv and do some additional life cycle management of omecamtiv. So those are our priorities in business development. Our goals are to do deals between now and the end of the year so that we end this year with still over 2 to 3 years of cash even as we expect our burn rate can go up next year alongside of our commercialization activities for omecamtiv. If we can't get those deals done, we've got a Plan B. Plan B, we did a deal earlier this year with Royalty Pharma, where we -- not only did we sell a piece of royalty, but we actually we entered into a transaction that's an equivalent, if you will, of a line of credit to support the commercial launch of omecamtiv mecarbil upwards of $300 million that proves even smarter today given higher interest rates, where the cost of capital is well below market. If we choose to take down these tranches of capital, we amortize repayment over 10 years. The first couple of years are interest free. So we have adequate capital to support the commercial launch and not have that subtract from what I know the Street is more focused on, which is how do we maximize the opportunity for aficamten and not do anything equity dilutive.

Excellent. So last question, a question we're asking every company at the conference. What is the reason to own in Cytokinetics stock in the next 12 months?

So I think that the Street is very fixated properly so on aficamten, and there's a lot of upside there in light of the fact that we may have a next-in-class compound that has already the benefit of validation, if you will, with mavacamten having been approved. And obviously, there's a dislocation around valuation for where Cytokinetics sits relative to what BMS paid for MyoKardia. That's for investors, maybe to focus on more than we, as a management team, get to wrapped up in but we are executing on a strategy where I think the Street has effectively focused to aficamten and not sufficiently focused to omecamtiv or aficamten, and whether you consider them both call options or upside vectors for value. Ours is a company which now on our 24th year is turning a corner where the work we've done for many years, pioneering and leading in muscle biology is translating to a somewhat uncommon opportunity with a late-stage pipeline, one potential medicine going to market and 2 others reading out Phase III studies. And all that's happening at the same time we're advancing other things in our pipeline. So we're never going to be accused of being an overnight success, but the company is realizing the promise of its science in meaningful ways.

Excellent. Well, thank you so much for your time, Robert. It was great to catch up with you today.